The Top 10 Benefits of Using a VMS

As competition in the market grows, it becomes more and more important to claim first mover status on new opportunities and trends in the market. This means that you have to make a fundamental adjustment to your vendor acquisition and management strategies.

With the right VMS technology in place, your procurement team will be able to sign up the best vendors and get the most benefit out of every vendor relationship. When your vendor relationships are properly managed, any disruptions to your supply chain can be anticipated and mitigated.

This is why you need the right technology and processes to handle vendor management and avoid running into problems.

In this article, we will give a brief overview of vendor management system (VMS) software, as well as the most important ways that your business could benefit from switching to VMS technology.

What is a Vendor Management System (VMS)?

Simply put, vendor management systems (VMS) are software specifically designed to manage all facets of your vendor relationships. The range of vendor management activities that can benefit from a VMS are numerous.

A VMS will streamline the process of choosing vendors, contract negotiations, keeping tabs on costs, monitoring service delivery, and mitigating vendor-related risk. The VMS will also manage the process of classifying vendors based on their strategic importance to your company.

Obviously, it's better to invest more time and resources into those strategic vendor partnerships that are crucial to your success.

One of the key benefits of using a VMS is that it integrates several business functions into a single interface. For example, the VMS manages the document and information management related to your vendors.

The system incorporates extensive document storage and organisation functions—which is essential for maintaining compliance between the different areas of your business and the activities of your vendors. Most VMS systems also include a dedicated vendor communication portal, which is a great aid in maintaining open lines of communication with your vendors.

Top 10 Benefits of a VMS

There are quite a number of ways that a VMS can benefit your company. Here are the top ten benefits of shifting your vendor management over to VMS technology:

1. Automated vendor management

Many of the routine tasks related to managing your vendors can be automated with a VMS. For example, the software can streamline your vendor sourcing and vetting processes. The VMS can also automate your vendor task assignment activities.

The system can also automate other routine tasks related to vendor management, for example vendor onboarding, invoicing, contract termination and offboarding. The result is that many of the most time consuming and error prone vendor management activities are simplified. This takes a lot of strain off your staff.

Other processes that can be automated with a VMS include managing contracts, giving out assignments, keeping tabs on expenditure, and identifying new opportunities for vendor assignments.

As the number of vendors and external workers you bring into your organisation grows, it becomes more and more important to maintain proper records.

A VMS can automate the  tedious but critical tasks of capturing all the necessary compliance and tax records. In this way, the technology ensures that all your vendors and contract workers have the necessary, up-to-date certification.

2. Better compliance tracking

Any business is faced with  several compliance issues on a day to day basis. Most companies have internal, corporate rules with regards to onboarding and managing vendors. These have to be taken into consideration when you work with vendors.

There are also certain external rules that apply to your business and that you are required to keep—rules that may vary wildly from country to country as you start to do business internationally. It's your responsibility to ensure that the internal running of your business complies with  governmental regulations and laws.

With all of these compliance issues, a VMS will be able to mitigate your risk of non-compliance through the following:

• The software will help you maintain all vendor records in a centralised location. This makes it easier to track and correct compliance across vendors.
• The system will be able to issue automated reminders that will alert you when it becomes time to renew compliance documents such  as licences, VISAs, or  tenures.
• The system can set up controls to manage the various compliance approval processes.

Because the VMS gathers and stores all compliance documentation into a centralised system, it becomes easier to track  compliance issues company wise.

Compliance documents will also not be duplicated in different locations and business units. And because of automated alerts, you won't forget to renew certain licences and applications.

3. Better vendor relationships

A VMS manages vendor relations from a centralised platform. Which means that the vendor acquisition process becomes transparent to the whole company.

So if a business unit requires the services of a vendor, they can post that request on the centralised system. They will also be able to post their requirements for the new vendor, as well as the outcomes they require.This makes it a simple task to track vendor requests company wide.

Now your vendor management has all the information they need to scout for appropriate vendors and then choose the right ones to meet these predetermined criteria.

When a vendor is engaged, the VMS will also be able to track the vendor's usefulness to the company as they fulfil their contract. In this way, you will be able to adopt a more systematic approach to vendor selection. It streamlines the process of picking vendors that will be able to deliver on the quality and value  that is required.

4. Automated invoicing and time tracking

A VMS will allow you to automate many of the most tedious and repetitive tasks involved in managing vendors—tasks such as time tracking, tracking expenses, and making payments.

This becomes especially useful if the VMS is able to integrate with your current payment processing and time tracking systems. Which means that the VMS automatically tracks all vendor activity and can automatically create detailed reports to reconcile accounts.

The result is a more efficient way of tracking goods and services rendered and issuing electronic invoices—which reduces administrative time and expense.

Some platforms are also able to perform these functions in the cloud. Which means that you can control features like time tracking, payment processing, and expense reimbursement from the most convenient and cost-effective device for the appropriate application.

No longer do you need to do this work in an office sitting behind a desktop computer. You will be able to do this work from your mobile phone or tablet, right on the shop floor or in the distribution depot or warehouse—wherever it makes the most sense from a logistical standpoint.

5. Lowered costs

There are several ways that a VMS can save your business money. For example, the system will help you to manage payrolls more efficiently. In this way you can avoid overpaying vendors and contractors for unrealistic overtime requests or inflated rates.

Since the system centralises all vendor activity in a single hub, you will be able to identify current resources to solve new problems. In this way you will avoid the unnecessary cost of recruiting and training people for tasks that can already be fulfilled by your existing staff.

The VMS will also allow you to evaluate your current labour situation with regards to worker types and the different rates they charge. Which means you will be able to leverage your existing resources better to improve overall company efficiency and lower costs.

6. Improved vendor transparency

One of the greatest benefits of a VMS is that it gives you unprecedented visibility into your external workforce. If you manage a network of vendors and suppliers you have a lot of people indirectly working for your company.

This is the external workforce. And with a VMS, you gain insight into who they are, where they work, and what resources they can bring to bear.

The result is that you can make a much better evaluation of their  value to your company. In this way, you will be able to manage all the different types of labour that contribute to your company. You will also be able to keep track of your external workforce at all times—even if they receive their paycheck from one of your vendors or partners.

7. Increased productivity

One of the key vendor performance indicators is the "time to fill"—the time it takes the vendor to make good on their promises in the form of goods or services rendered.

A VMS allows you to automate the process of sourcing the right vendor for a specific task. Which means you have a better chance of getting an appropriate candidate quickly. The result is that the task will get done faster.

This can have a drastic impact on a company's productivity. In some instances (and with the right VMS setup), some companies have been able to reduce their requisition time from months to mere days. In a competitive marketplace, speed is key. You need to increase the agility of your organisation so that you are able to respond to any changes in the market.

8. Improved vendor onboarding

A VMS allows you to automate and better manage many of the tasks involved with onboarding new vendors. This shortens the time from when a vendor is selected and  when they can become productive.

The best vendors are able to choose who they want to sign contracts with. If you make it easier for them to do business with you, they will be more inclined to sign up with you than with the competition.

This will also allow you to build long lasting and productive relationships with your most important vendors.

9. Build a stronger network of vendors

A VMS will manage the process of building a network of capable vendors. In this way, you will have the right team in place to meet your needs going forward. Here are just some of the ways that a VMS can help your organisation assemble an effective network of capable vendors:

• The VMS manages the vendor selection process so that you can build up a strategic network of vendors able to take your business to the next level.
• The system will allow you to identify the best labour type for each task—for example, whether using an independent contractor, intern, or temp worker would be more effective.
• The VMS will assist you in building up a list of preferred suppliers and temp agencies so that you can source the best labour from the best avenues.
• Some VMS vendors are able to provide you with an ecosystem of preferred service providers. This will allow you to source labour from services that you wouldn't normally have in your network.

10. Advanced analytics and reporting

A VMS gives you access to advanced analytics and reporting capabilities to make better vendor related decisions. Many VMS solutions also offer machine-learning capabilities. This allows you to gain unprecedented insight into the performance of your vendors.

You will be able to simulate  different vendor assignment scenarios and test out different strategies for how you leverage your network of vendors to solve problems in your business and corner sectors of the market. This will also give you insight into the type of vendors you need to sign up for future ventures and expansions in your business.

Once you start to implement a specific strategy, the system will monitor the results to a high degree. This enables you to adjust your strategy on the fly and get the greatest benefit from your vendor relationships.

Conclusion

When you shift your business to VMS technology, you will be able to:

• track the performance of each vendor, identify areas where you need additional vendors, and identify areas where you need to expand your existing vendor relationships
• identify the areas where you use too many vendors and need to simplify your operations to cut costs
• identify the vendors who are the most efficient and cost effective, so that you can reward them appropriately
• identify the vendors which are not delivering on their agreements so that you can take the necessary corrective steps

In short, a VMS will allow you to manage your vendors properly. This will improve the efficiency  of your supply chain. The result is that you will be able to provide better and more consistent service to your customers—which will boost profitability and burnish your brand.